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15 Mistakes Businesses Make When Billing their Customers

billing mistakes

To many people, paperwork is regarded as a tedious and boring task that sucks up your time and drains you of energy and joy. Unfortunately for business owners, paperwork is also necessary to keep a business up and running. Running a successful business may require many different types of paperwork, but one of the most important paperwork processes is billing customers.

Without a stream-lined and accurate billing system, a business might see major delays in payment. And without that money coming into their cash flow, they may find themselves unable to continue operating.

Even though billing customers is arguably the most important part of business paperwork, many businesses still make mistakes on a regular basis when billing their customers. In order to help your business avoid some of these costly mistakes, we’ve created a guide of the 15 mistakes businesses most often make when billing their customers so you know what to avoid.

Mistakes Businesses Make When Billing their Customers

1. Get a Signed Contract

Gone are the old days where a handshake and a promise were enough to ensure you’d get paid for your work. If you want to prevent your business from getting stiffed by a customer, get a signed contract from each and every one of them.

Not having a contract can result in miscommunication between you and your customers and possibly even an unpaid bill, which could cost you hundreds or even thousands of dollars. In order to protect both your business and your customers, create contracts, get them signed, and file them in an organized, easy to manage way.

2. Include the Payment Due Date

Your invoice needs to clearly state the payment due date. You might be inclined to list the due date as “net 30” instead of simply saying “30 days”. However, FreshBooks found the term “net” to be confusing to customers. Be as clear as possible by stating a number of days or a specific date the invoice is due. Not including a due date is a mistake that could delay your payment by days, weeks, or even months. Customers may not pay right away if no payment due date is listed.

3. List Payment Options

There are ways to make the payment process easy for your customers, which in turn helps you to receive payments more timely and accurately. One of the easiest forms for you to receive payments is through an online payment system, such as eCash.  Using a payment system like this can cut down on the number and dollar value of unpaid invoices you’ll have to deal with later.

4. Bill Regularly

Obviously, the longer you wait to create and send an invoice to your customers, the longer it will take you to receive payment from them. But in addition to invoicing promptly for work completed, you should also establish a billing system that includes sending scheduled invoices to your customers.

Most businesses choose to bill at the beginning or end of each month on the first or last business day. This will increase the chances of you getting paid for the work you provide and will also make it easier for long-term or repeat customers to plan ahead for your bill.

5. List Specific Details

Don’t overlook adding details on the bill about the product or service you provided. Being specific helps your customers to know exactly what you are charging them for. If the customer requires a purchase order number on the invoice, include it.

Doing so will likely speed up the time it takes for you to receive your payment. If you need to know about other specific details to include on your invoice, you can use this helpful guide to invoicing.

6. Number Invoices

Not numbering invoices is an error that can easily be fixed. When you use a numbering system, it helps you to identify and locate individual invoices, as well as keep track of which ones are paid and which ones are not. It can also be helpful for looking up past information for tax purposes.

7. Include Prompt Pay Discounts

If you add an incentive for your customers to pay you right, you increase the chances of getting paid timely. Or you could opt to include a discount for customers who do repeat business with you to help your business grow. Another idea to consider is the use gift cards or punch cards for those who become regulars.

8. Use a Header

Putting a professional header with your business logo at the top of your invoice helps your customers identify who is billing them and where to send payments. Make sure you include all of the different ways they can contact you to speed up the payment process, including your address, phone number, and email address.

9. Interest Fees

Be clear about how much and when interest will be applied on the invoices you send. Your terms should state specifics, such as interest charges or turning the bill over to a collection agency if it is not paid timely. This might make some customers pay on-time just to avoid additional fees. When you have customers who don’t pay, having this detailed on your invoice can help in the collection process.

10. Double Check the Invoice

Look over what you are sending out on the invoice before you actually send it to eliminate errors. This goes for paper invoices as well as electronic invoices. Accuracy about what you are billing for will increase the likelihood of accurate and timely payments. This is one of the top mistakes businesses make when billing their customers for the first time.

11. Create a System

If you are looking for an invoicing system that is easy to use, there are plenty of options available to choose from. Failing to manage invoices sets you up for a bookkeeping nightmare and could ultimately cause your business to fail.

Establish a location for unpaid invoices separately from those that are paid to improve the accuracy of your payment system. It should be easy for you to manage so you can find both unpaid and paid invoices in a hurry if you are talking to a client on the phone and need to reference a past transaction.

12. Marketing

Using past purchasing information from your clients can help you to know what they are looking for in the future. With increased accuracy in your invoicing, you can track past transactions and increase the possibility that your customers will come to you again for similar services.

13. Use Reminders to Follow Up

Sometimes customers need a courtesy call or a second statement to remind them of an unpaid bill. Scheduling reminders or second statements can increase the likelihood of you getting payment for the services you provided.

14. Know the Law

There are both state and federal laws that apply to billing and collecting practices. Knowing what you can and can’t do is a must for a business owner. Find out what the laws say to ensure you do not violate them. That could make it even more difficult for you to receive the payment you are due.

15. Be Courteous

Always be courteous when asking for payment. Keeping and losing customers could be as simple as keeping an even tone and smiling when dealing with them. Just because you are asking for payment, even a late payment, doesn’t mean you should treat them poorly.

Billing your customers is not the most fun task, but it is a necessary one. Avoiding these 15 mistakes businesses make when billing can help you ensure you stay in business for a long time to come.

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Kayla is passionate about helping people get their finances in order so they can pursue a life of freedom. She quit her job to work for herself with over $148,000 of debt and swears it was the best decision she’s ever made!

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